General Studies Paper 3

• Context: Infrastructure is universally acknowledged as a key driver of growth. The term infrastructure, however, is usually associated with physical assets,such as roads, ports, power transmission lines, etc. However, in recent years, India’s growth story has been closely associated with a strong focus on not only physical, but also social and digital infrastructure.
• Budget 2023 gives a powerful thrust to these three dimensions of infrastructure development which, put together, accelerate inclusive growth. The targeted investments will not only create vital physical infrastructure and improve connectivity that will accelerate the movement of passengers and freight, but also create jobs, spur private investments, and provide a cushion against global headwinds.
• In Budget 2022-23, India focused on giving the necessary push to the economy by investing in various infrastructure projects. In the upcoming Budget, the infrastructure sector will receive a similar amount to reach India’s goal of becoming a USD5 trillion economy by 2025

Proposed Allocation in the 2023-24 Budget:

• India’s Capital Expenditure:
  • India’s capital expenditure  as a percentage of GDP increased from 7% in 2014 to nearly 2.9% in 2022-23.
  • For infrastructure, Rs 10 lakh crore (3.3% of GDP) was allocated in the budget 2023-24, an increase of three times from 2019.
• Largest Allocation:
  • The Ministry of Railways received its highest-ever allocation of Rs 2.4 lakh crore,approximately nine times the allocation in 2013-14.
  • The Ministry of Road Transport and Highways saw a 36% increase in its budget to about Rs 2.7 lakh crore.
• Extension of Interest-Free Loan to States:
  • The direct capital investment by the Centre has been further supplemented by a one-year extension of the 50-year interest-free loan to state governments to encourage infrastructure investment and incentivise complementary policy actions, with a significantly increased outlay of Rs 1.3 lakh crore.
    • This will lead to decentralised infrastructure development in urban and peri-urban areas across regions.
    • Increasing allocations to PM Awas Yojana  by 66% will not only provide rural workers with housing, but also create jobs.

Why is India’s Infrastructure Push Challenging?

• Physical Infrastructure:
  • Land acquisition:One of the biggest challenges in building physical infrastructure is acquiring land, as it often involves resettlement of people and compensation issues.
  • Funding:Funding large-scale infrastructure projects is also a major challenge, as the government may not have sufficient resources and private investment may be limited due to economic and regulatory hurdles.
  • Lack of Technology: India faces challenges in terms of the availability of technology and expertise necessary for complex infrastructure projects.
• Social Infrastructure:
  • Inadequate Human Resources:The shortage of skilled workers, engineers, and managers can be a hindrance to the development of social infrastructure projects.
  • Lack of Public Support:Social infrastructure projects, such as healthcare and education, require public support and buy-in, which can be difficult to secure in a complex political environment.
  • Inadequate Planning and Implementation:Poor planning and implementation can result in substandard facilities and a lack of sustainability, ultimately reducing the impact of the infrastructure push.
• Digital Infrastructure:
  • Digital Divide:There is a digital divide  in India, with limited access to technology and the internet in rural areas, which can hinder the development of digital infrastructure.
  • Cybersecurity Concerns:The increasing use of technology also raises concerns about cybersecurity  and privacy, making it necessary to have strong regulations and infrastructure in place.
  • Lack of standardization:The lack of standardization and coordination among different players in the digital infrastructure sector can create problems for users and limit the potential for growth and innovation.

Related Initiatives:

• For Digital Infrastructure:
  • First Phase:
  • JAM trinity— Jan Dhan, Aadhaar and mobile linkages
    • Digital India programme
  • Second Phase:
    • Development, application, and large-scale expansion of cutting-edge technologies such as 5G, Internet of Things (IoT), Artificial Intelligence (AI), quantum computing,  mechatronics, robotics and more.
    • An important domain that the government is focusing on currently is creating open AI resources.
    • Example:
      • Digital India Bhashini portal is India’s Artificial Intelligence (AI) led language translation platform.
      • The Agriculture Accelerator Fund announced in the budget will enable the Indian agricultural ecosystem (startups, businesses, and farmers) to work collaboratively and find knowledge-based and farmer-centric solutions.
    • Social Infrastructure:
      • Mission to Eliminate Sickle cell Anaemia:
        • In the Union   Budget 2023-24, the government has announced a mission to eliminate  Sickle cell Anaemia by 2047.
      • PM Poshan Shakti Nirman or PM Poshan:
        • It is the largest school feeding programme of its kind in the world, covering students enrolled in government schools from Classes 1 to 8.
      • Beti Bachao Beti Padhao:
        • It was launched in 2015 with the aim to address sex selective abortion and the declining child sex ratio which was at 918 girls for every 1,000 boys in 2011.
      • Physical Infrastructure:
        • PM Gati Shakti Scheme:
          • It aims to ensure integrated planning and implementation of infrastructure projects in the next four years, with focus on expediting works on the ground, saving costs and creating jobs.
        • Bharatmala scheme:
          • In 2022, India saw a major push in construction of highways with more than 5000 kms of National Highways constructed.
          • Targeted development of highways under the Bharatmala scheme has helped in bridging of infrastructure gaps in development of economic corridors

Way Forward:

• Investment in social infrastructure:
  • Investment in social infrastructure can lead to a more productive and proficient workforce,reduced mortality, wasting and stunting, increased social mobility and a higher quality of life.
    • Social infrastructure includes education and skilling, public health and nutrition, drinking water and sanitation.
  • These factors contribute to a stronger and more inclusive economy and holistic development.
• Increased Public-Private Partnerships (PPPs):
  • The government can partner with the private sector to finance, design, construct, and operate infrastructure projects.
• Improved Project Planning and Implementation:
  • The government can streamline project planning and implementation processes to ensure that projects are completed on time and within budget.
• Implementation of Innovative Financing Solutions:
  • The government can explore innovative financing solutions, such as infrastructure bonds to mobilize additional funds for infrastructure development.
• Encouraging Foreign Direct Investment (FDI):
  • The government can ease regulations and create a favorable environment for  foreign direct investment in infrastructure development.
• Building Human Capital:
  • The government can focus on building human capital in the form of skilled labour and technical expertise to support infrastructure development.
    • Some ways to build human capital to support infrastructure development:
      • Investing in workforce development programs that provide job training, apprenticeships.
      • Providing access to quality education and training programs
      • Supporting research and innovation in infrastructure-related fields
      • Fostering partnerships between the public and private sectors to encourage investment in human capital development
    • Schemes to build human capital and support infrastructure development include:Skill India, National Skill Development Corporation (NSDC), Pradhan Mantri Kaushal Vikas Yojana (PMKVY).
  • Effective Regulation:
    • The government can establish and enforce effective regulations to ensure the quality and safety of infrastructure projects.
    • Some ways regulations can help:
      • Regulations can set standards for the quality of materials, workmanship
      • Regulations can also specify safety requirements, such as fire safety, evacuation plans, and accessibility standards, which must be met to ensure the safety of the public and the workers involved in the project.
      • Independent inspection and testing which will help to identify any issues or problems that need to be addressed before the infrastructure is put into use.

General Studies Paper 3

• Context: The focus of economic growth has been on income generation. The development of masses, rising inequalities and employment generation is neglected.

Economic scenario of India:

• Private investment plans during the first nine months of this year to be over 50% greater than what they were a year ago.
• India it seems is on a roll as far as economic growth is concerned.
• India has overtaken the United Kingdom to become the world’s fifth largest economy.
• The London Based consultancy Centre for Economics And Business Research (CEBR) predicted that by 2035, India’s economy would reach $10 trillion and become the world’s third largest by 2037.

Why is the West interested in the growth of the Indian economy?

• India is a democracy in the east and also the largest one in terms of population. All the countries in the West are democracies. So, they see a possible alliance of interests.
• India’s growing economic size has made it attractive in a way that it was not before. Its fast growth is an investment opportunity for the surplus savings of the West. Investing money in India is likely to yield the highest returns globally.

What is the status of employment in India?

• Government data show that in mid­ 2022, unemployment among urban males was much higher than it was a decade ago.
• Data from the Centre For Monitoring Indian Economy show that the number of people employed in December 2022 was less than it was in 2016.
• Clearly, the growth of the national economy has not generated an equal growth in employment.

Impacts of growth on Environment:

• Uncontrolled growth will almost certainly result in ecological insecurity.
• The construction of new elevated national highways destroys agricultural land and jeopardizing livelihoods.
• Plans for infrastructure aimed at religious tourism in Uttarakhand and Kerala have caused landslides and flooding. It led to suffering for their people.

What can be done to improve employment opportunities for the masses?

• Employment opportunities for the mass population will arise only when there is demand for goods in the production of which they can participate.
• Growth of the IT sector or of exportable manufactures will not be of much use for them. They possess low education and skills.
• Increased demand for goods of mass consumption alone will lead to an expansion in the demand for these workers.
• For an expansion of this demand,low inflation is essential. Only then will low ­income households have enough to demand more manufactured goods.
• A concerted policy focus can create the conditions for employment generation in India. Welfarism, defined by the free or subsidised distribution of private goods, is no substitute.

Way forward for economic policy:

• India needs growth as it has a backlog of poverty. But growth alone is not enough for improving the lives of the poorest. It is ecologically harmful.
• Size is valuable only when it enhances the well being of the population.

General Studies Paper 2

• Context: India and France are celebrating 25 years of their strategic partnership.

Current status:

• Strategic cooperation– Strategic partnership was signed in 1998. They have shared values and aspirations of peace, stability. Both have a desire for strategic autonomy.
• There are no real substantive disagreements between the two nations.
• There is a high level India-­France political dialogue that is ongoing in defence, maritime, counterterrorism and the Indo ­Pacific.
• Trade and investment– France has emerged as a key trading partner of India. Annual trade was $12.42 billion in 2021­-22.
• It is the 11th largest foreign investor in India with a cumulative investment of $10.31 billion from April 2000 to June 2022. It represents 1.70% of the total foreign direct investment inflows into India.
• Defence partnership– It has emerged as a key defence partner for India, becoming the second largest defence supplier in 2017­-2021.
• Key examples of defence cooperation are the induction of the French Scorpene conventional submarines, built under technology transfer agreement of 2005, and the Rafale fighter jets.
• The Tata group has also tied up with Airbus to manufacture C­295 tactical transport aircraft in Vadodara, Gujarat.
• There is a robust network of military dialogues. They regularly held joint exercises like Varuna, Garuda, and Shakti.
• Civil nuclear cooperation– France was among the first countries with which India signed a civil nuclear deal. It has also played a critical role in limiting India’s isolation in the non­-proliferation order after the 1998 nuclear tests.
• France supports India’s bid for permanent membership of the United Nations Security Council as well as its entry into the Nuclear Suppliers Group.
• Climate change– it is an area of importance for both. India has supported France in the Paris Agreement expressing its strong commitment towards mitigating climate change impact. Both countries launched the International Solar Alliance in 2015.
• Cooperation in the Indian ocean– India and France are resident powers of the Indian Ocean and in the Indo ­Pacific. Both have signed “Joint Strategic Vision of India ­France Cooperation in the Indian Ocean Region” which presented a blueprint for a strengthening of ties. In operational terms, both do joint patrolling in the Indian Ocean.
• Indo Pacific– Both countries have articulated their common vision for a free, fair and open Indo ­Pacific. It seeks to provide comprehensive solutions for maritime security, regional cooperation, and climate change adaptation.
• India and France in September 2022 agreed to set up an Indo­-Pacific Trilateral Development Cooperation Fund that will support sustainable innovative solutions for countries in the region. The two partners have formed a trilateral grouping with the United Arab Emirates to ensure maritime domain awareness and security from the east coast of Africa to the far Pacific.
• Global cooperation– While there are divergences over the Ukraine crisis, there is a broad understanding of each other’s position. Both countries are working together to coordinate on playing a constructive role in the crisis.
• Macron and Prime Minister Narendra Modi are among the few world leaders who have maintained open communication channels with the Russian President and Ukraine’s President.
• Both countries share concerns over the rise of China and its aggressive behaviour.
• Cooperation in emerging areas– They are looking for cooperation in issues such as digitisation, cyber, green energy, a blue economy, ocean sciences, and space.

General Studies Paper 3

Context:

• The Budget 2023-24,has received almost universal praise in the English language media. The Budget is pro-growth, and their prognosis is plausible.

The priorities articulated in the vision for Amrit Kaal:

• Opportunities for citizens with a focus on the youth
• Growth and job creation
• Strong and stable macroeconomic environment
• Saptarishi(seven priorities)
• infrastructure and development
• green growth
• financial sector
• inclusive development
• reaching the last mile, to mention a few

Evidences of growth:

• Data shows that private investment plans during the first nine months of this year to be over 50% greater than what they were a year ago.
• Government proposed a target of $5 trillion within five years (2024-25) for India’s economy.
• India has overtaken the United Kingdom to become the world’s fifth largest economy.
• Consultancy Centre for Economics and Business Research (CEBR): By 2035, India’s economy would reach $10 trillion and become the world’s third largest by 2037.

The West’s self-interest in India:

• There is an element of awe that a country once a byword for famine has sloughed off the dead weight of colonial exploitation and grown.
• India is not only a relatively rare democracy in the east but also the largest one in terms of population.
• As all the countries in the West are democracies, western elites see a possible alliance of interests.
• India’s growing economic size has made it attractive for investors.
• India’s fast growth is an investment opportunity for the surplus savings of the West.
• Investing money in India is likely to fetch the highest returns globally.
• The continuous support from the West about India’s growth reflects a deep-seated self interest.

Issues of unemployment:

• Unemployment was barely mentioned in the Finance Minister’s Budget speech.
• Government data show that in mid-2022, unemployment among urban males was much higher than it was a decade ago.
• Data from the Centre For Monitoring Indian Economy Pvt. Ltd: It shows that the number of people employed in December 2022 was less than it was in 2016.
• The growth of the national economy has not generated an equal growth in employment.
• India does not have an employment policy,either at the Centre or in the States.
• Welfarism, defined by the free or subsidized distribution of private goods, is no substitute.

How will employment opportunities rise?

• Employment opportunities will arise only when there is demand for goods in the production of which they can participate.
• Increased demand for goods of mass consumption alone will lead to an expansion in the demand for these workers.
• For an expansion of this demand, arresting the price of food would be essential.

Way Forward

• India could well grow fast over the next decade-and-a-half without generating sufficient employment for the legion of unemployed youth, especially in rural areas.

• • A concerted policy focus can create the conditions for employment generation in India.

• Political parties seem to be pursuing growth with a view to enhancing their electoral prospects, without concern for a possible negative fallout.
• India needs growth as it has a backlog of poverty. But the growth that one often sees does not do enough for improving the lives of the poorest, such as by generating employment, and is ecologically harmful.

• • Size is valuable only when it enhances the well being of the population.

General Studies Paper 3

Context: 

• UNEP released a new report – Bracing for Superbugs: Strengthening environmental action in the One Health response to antimicrobial resistance.
• It provides evidence that the environment plays a key role in the development, transmission, and spread of Anti-Microbial Resistance (AMR). 

About AMR:

• Antimicrobials are agents intended to kill or inhibit the growth of microorganisms. They include antibiotics, fungicides, antiviral agents, and parasiticides.
• AMR occurs when microorganisms such as bacteria, viruses, parasites, or fungi become resistant to antimicrobial treatments to which they were previously susceptible.

Key findings of the report:

• Up to 10 million deaths could occur annually by 2050 due to antimicrobial resistance (AMR), on par with the 2020 rate of global deaths from cancer.
• Pollution in key sectors of the economy contributes to the development, transmission, and spread of AMR.
• AMR’s economic toll could result in a GDP drop of at least USD 3.4 trillion annually by 2030,pushing 24 million more people into extreme poverty
• Microorganisms (particularly bacteria) can acquire resistance following contact with resistant microorganisms.
• AMR challenges are linked to the  triple planetary crisis of climate change, biodiversity loss, and pollution and waste.
• Three key sectors of AMR development and spread in the environment: Pharmaceuticals and other chemical manufacturing, agriculture and food production, and Healthcare.  

Suggestions in the report:

• Create robust and coherent national-level governance, planning, regulatory and legal frameworks.
• Increase global efforts to improve integrated water management and promote water, sanitation, and hygiene to limit the development and spread of AMR.
• Increase integration of environmental considerations into AMR National Action Plans.
• Establish international standards for what constitutes a good microbiological indicator of AMR
• Environmental monitoring and surveillance
• AMR requires a  One Health  response that recognizes that the health of people, animals, plants, and the environment are closely linked and interdependent.

General Studies Paper 3

Context:

The RBI had recently released its 26th Financial Stability Report (December 2022). In the report, the RBI remarked that the credit to the Microfinance sector has grown at a steady pace. However, the report highlighted the building stress levels in the loans portfolio (i.e., bad loans are increasing). The share of loans overdue by more than 90 days has risen to 14% in September 2022, from 12% in March 2022. Microfinance is considered a potent tool to ensure balanced and inclusive growth, especially by providing access to credit to the rural citizens and small entrepreneurs. The rising delinquency (Being delinquent refers to a situation wherein the borrower is overdue on a loan payment by a certain number of days) in Microfinance is indicative of the challenges faced by the sector. The Government has been supporting the sector through various initiatives. The Government has to step in to address the issues faced by the sector.

Meaning of Microfinance:

• Micro Finance is defined as ‘provision of credit and other financial services and products of very small amounts to the poor in rural, semi urban or urban areas, for enabling them to raise their income levels and improve living standards‘. It is an economic tool designed to promote financial inclusion which enables the poor and low-income households to come out of poverty.

Components of Microfinance

• Micro credit: Micro credit is the extension of very small loans to borrowers who typically lack collateral, steady employment or income stream and verifiable credit history. It is designed to support small-scale entrepreneurship, alleviate poverty, empower women and uplift the poor social class by extension. Microcredit is delivered through a variety of institutional channels including Scheduled Commercial Banks (through Business Correspondents), Regional Rural Banks (RRBs), Cooperative Banks, Non-Banking Financial Companies (NBFCs) and Microfinance Institutions (MFIs).
• Micro Insurance: It is the insurance with low premiums and low coverage. Micro-insurance covers low income/net-worth persons and transactions are of low value. Like normal insurance, it can cover wide range of risks including damage to crops and livestock.
• Micro Saving: Micro saving is targeted at people with low incomes and low savings. They are similar to saving accounts, but designed for small deposits. Typically, the limit of minimum deposit/balance is low and there are no service charges.
• Microfinance Institutions: Institutions providing Microfinance services are called Microfinance Institutions (MFIs). A large number of organisations with varied size and legal forms offer Microfinance services. The MFIs exist as separate institutions because of the unique features of Microfinance like high transaction costs, short duration of loans, high frequency of repayment/instalments, absence of collateral and relatively higher rate of default.

Types of Microfinance Institutions in India

• Joint Liability Groups: JLGs are informal group of 4-10 people that seek mutually assured loans. Agriculture-related loans are typical. Farmers, rural labourers, and renters are among the debtors in this category. JLG members are equally responsible for loan repayment.
• Self-Help Groups: An SHG is a group of people in similar socioeconomic situations who come together to help each other. They are self-governed. Members come together (often for a limited time) to form a shared fund for their mutual business requirements. This type of cooperative financing does not necessitate the use of collateral. In addition, borrowing rates are often cheap. Several banks have formed partnerships with SHGs in order to increase financial inclusion in the country’s rural areas e.g., the NABARD-SHG linkage program, allows numerous self-help groups to borrow money from banks if they can show that their borrowers have made regular payments.
• Regional Rural Bank Model: The main purpose of this strategy is to boost the rural economy. They have been created to serve rural areas with basic banking and financial services.
• Cooperatives: Rural cooperatives were established at the time of India’s Independence. Through the cooperatives, resources of the poor are pooled and financial services are made available.
• MFIs, based on their set-up, are regulated as NBFCs by the RBI, or through Companies Act, 2013.

Status of Microfinance

• According to NABARD, the SHG-Bank Linkage Programme, covers 14.2 crore families through 119 lakh SHGs (87% of which are women) with savings deposits of INR 47,240.48 crore (March 31, 2022).
• NABARD has sanctioned a cumulative grant assistance of INR 255.81 crore to Joint Liability Groups Promoting Institutions (JLGPIs) for promoting 12.77 lakh JLGs (March 31, 2022). There are 188 lakh JLGs of which 54 lakh were promoted during FY 2021-22 (as against 41 lakh promoted in FY 2020-21). During FY 2021-22, loan disbursed was INR 112,772.75 crore.
• According to NABARD, Microfinance operations in India are spread across 595 districts of 28 States and 5 Union Territories. As on 31 March 2022, the combined micro credit portfolio of 225 lenders is INR 262,599 crores.

Benefits of Microfinance

• Credit to Low-Income Borrowers: Microfinance provides credit to the poor people with low income and assets who face difficulty in accessing finance from formal banking institutions. They help in providing funds to small entrepreneurs in poor regions.
• Collateral-Free Loans: No collateral is required for Microfinance loans. This helps persons with little or no assets to access credit.
• Financial Inclusion: Microfinance helps those sections of population who are unable to access credit from Banks/formal institutions.
• Income Generation: Loans provided by MFIs help small entrepreneurs set-up/expand/scale-up their operations. This enables them to improve their income.
• Women Empowerment: Microfinance facilities have proven to be vital in providing financial independence to women and thus empowering them. As noted by NABARD Report, SHG-Bank Linkage Programme has benefited 119 lakh SHGs, 87% of which are women. Access to finance will help increase women-led MSMEs.
• Rehabilitation: Microfinance is able to provided access to finance in naxal areas as well. It has thus helped in rehabilitation of the conflict-affected people.
• Rural Development: Microfinance boosts economic activities in the rural area and thus aids in rural development. It helps create livelihood opportunities as well.
• Encourage Self-Sufficiency and Entrepreneurship: MFIs can provide much-needed funds to an individual for the establishment of a new business that requires small investment and offers long-term profit. Thus they promote entrepreneurship and self-sufficiency among the lower-income population.

Challenges associated with Microfinance

• Financial Illiteracy: Financial illiteracy leads to lack of awareness about various MFIs, and the services the offer. This makes the poor people reluctant to approach the MFIs.
• Inability to Generate Funds: MFIs face difficulty to raise sufficient funds as they are generally not ‘for-profit’. This restricts their access to funds from private equity investors or other market-based avenues of funding.
• Heavy Dependence on Banks: MFIs are dependent on borrowing from banks. For most MFI’s funding sources are restricted to private banks. Funds available from these banks are typically for short term, generally 2 years. Moreover, Banks tend to disburse loans at the end of financial year to meet the targets. This can create issues for MFIs if there is delay in repayment of loans by borrowers.
• Weak Governance: Many MFI’s are not willing to convert to a corporate structure; hence there is lack of transparency. This also limits their ability to attract capital. MFI’s face challenge to strike a balance between social and business goals.
• Interest Rate: Some MFIs charge high interest rates, which the poor find difficult to pay. MFIs are private institutions and do not get any subsidized credit for their lending activities. Thus they tend to charge higher interest rate.
• Regional Imbalances: There is unequal geographical growth of MFIs and SHGs in India. About 60% of the total SHG credit linkages in the country are concentrated in the Southern States. In poorer regions like in Jharkhand, Bihar etc. where the proportion of the poor is higher, the coverage is comparatively lower. This could be attributed to lack of State government support, NGO concentration and public awareness

Steps have been taken to promote Microfinance in India

• Government Programmes: (a)SHG-Bank Linkage Programme (SHG-BLP): This channel was initiated by NABARD in 1992. This model incentivises women to unite together to form a group of 10-15 members. Women belonging to financial backward classes contribute by giving their individual savings to the group at regular intervals. Loans are provided to the members of the group by their contributions; (b) Micro Enterprise Development Programme (MEDPs): The programme enables SHG members to be up-skilled to take up income generating livelihood activities. The main objective of the programme is to enhance the capacities of participants through appropriate skill up-gradation in existing or new livelihood activities in farm or non-farm activities. It helps enrich knowledge of participants on enterprise management, business dynamics and rural markets; (c) Livelihood and Enterprise Development
• Programme (LEDP): It was initiated on a pilot basis in 2015 with a view to create sustainable livelihoods among matured SHG members and to obtain optimum benefit from skill up-gradation. LEDP is a holistic intervention mechanism conceived to take care of the entire ecosystem required for livelihood promotion in both farm and off-farm activities. It is implemented through cluster-based approach within contiguous villages. It has a provision for intensive training for skill building, refresher training, backward-forward linkages, handholding and escort support for credit linkage; (d) Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE): It implements the credit guarantee scheme for Micro and Small Enterprises (MSEs). It has added MFIs to the list of member lending institutions (MLIs).
• Financial Support by NABARD and SIDBI: (a)NABARD supports MFIs in their formative years (as NGO-MFIs) with grant support and Revolving Fund Assistance (RFA). NABARD had also created the Micro Finance Development and Equity Fund (MFDEF) in 2006 to help a number of MFIs with quasi-equity and subordinated debt instruments; (b) SIDBI has aided the growth of MFIs through its SIDBI Foundation for Micro Credit (SFMC). The India Microfinance Equity Fund (IMEF) of SIDBI has also supported MFIs, especially the medium and smaller ones with equity and quasi-equity. Since IMEF had similar function as MFDEF, it (MFDEF) was withdrawn in 2013; (c) MUDRA: Support to Microfinance sector was scaled up by Government of India by setting up the Micro Units Development & Refinance Agency Ltd (MUDRA) in 2015. It is an NBFC that focuses on micro-enterprises, extending financial support to MFIs for on-lending to individuals/groups/JLGs/SHGs.
• Regulatory Initiatives: (a)Y H Malegam Committee: It was set-up in the wake of AP Microfinance crisis in 2010. It was constituted by the RBI to study issues and concerns in the Microfinance sector; (b) Introduction of Regulations for NBFC-MFIs: Based on the recommendations of the Malegam Committee, RBI introduced a comprehensive regulatory framework for NBFC-MFIs in December 2011. The regulations prescribed eligibility criteria for Microfinance loans linked to core features of Microfinance i.e., lending of small amounts to borrowers belonging to low-income groups, without collateral, and with flexible repayment schedules; (c) Regulatory Framework for Microfinance Loans: RBI has implemented Regulatory Framework for Microfinance Loans, effective from April 1, 2022, to update Microfinance regulatory policy. This will create regulatory parity between Regulated Entities (RE) that provide Microfinance, harmonise regulations to protect customers from over-indebtedness, and define Microfinance. Microfinance loans are now collateral-free loans for households having annual income up to INR 3 lakh.

Way forward:

• Regulation: The Microfinance sector has expanded a lot in the last 2 decades. Hence there is a need for a comprehensive regulatory framework for the sector, instead of piecemeal and reactive regulatory initiatives.
• Interest Rate Transparency: MFIs are employing different patterns of charging interest rates and a few are also levying additional charges. MFIs should transparently inform the borrowers regarding the interest rate charged on the loans.
• Encourage Microfinance Penetration: Encouraging MFIs for opening new branches in areas of low Microfinance penetration by providing financial assistance will increase the outreach of the Microfinance. This will increase rural penetration of Microfinance.
• Expand Product Range: MFIs should provide complete range of products including credit, savings, remittance, financial advice and non-financial services like training and support. This will enable the people from underserved access all financial services.
• Use of Technology: MFIs should use new technologies, IT tools, and applications to reduce operational costs.
• Different Sources for Raising Funds: In the absence of sufficient finances, the reach of MFIs becomes limited. MFIs should look for other sources for funding their loan portfolio e.g., by converting to for-profit company (NBFC).

Conclusion

• The Microfinance sector has played an important role in ensuring inclusive and balanced development. Yet the benefits of Microfinance have been limited to some regions. Moreover, the sector faces issue of rising bad loans along with several operational challenges for the MFIs. There is a need for comprehensive regulation of the sector to make it more inclusive and sustainable.

General Studies Paper 3

Context:

• Recently, Ladakhi innovator and engineer Sonam Wangchuk completed his five-day “climate fast”. The fast was held by Mr. Wangchuk in an effort to draw the attention of Indian leaders to the region’s fragile ecology and to secure its protection under the Sixth Schedule of the Constitution.

Issue of Ladakh’s fragile Ecology

• About:
  • Ladakh and the Himalayas form the‘third pole’ of the world and are among its few frozen freshwater sources.
  • The Himalayas, along with all glaciers and river basins, are also called the “water tower of Asia”.
  • People of the region depend on glaciers to fulfill their water needs.
• Melting glaciers of Ladakh:
  • Ladakh is a cold desert and extremely sensitive to climate change.
  • Glaciers in Ladakh have been melting at an alarming rate.
  • According to a study published in 2021, glaciers in the Pangong region retreated around 6.7% between 1990 and 2019.
• The melting of glaciers has the following effects on the lives of Ladakh’s people: 
  • Water scarcity: 
    • They lose potable water;
    • Agriculture practices specific to the region are threatened; and
    • Sustainable practices that support life in the region, like surviving on a minimal quantity of water, are slowly eroded.
  • Loss of livelihood and culture:
    • Loss of sustainable practices due to scarcity of water may also affect the livelihoods of locals and their cultural heritage, and force them to migrate.
  • Loss of biodiversity: 
    • A change in the ecological balance of Ladakh will also impact the biodiversity of the area.
    • The flora and fauna of Ladakh are highly evolved to survive in harsh climatic conditions and will be threatened due to changes in the local ecosystems.
  • Collapsing ecosystem:
    • Even the slightest disturbances in an ecosystem as fragile as Ladakh can lead to the collapse of the whole ecosystem
  • Potential challenges:
    • Excessive rainfall:
      • According to experts, it is possible climate change will lead to excessive rainfall in Ladakh by around 2045 due to global warming.
      • An increase in temperature has a direct impact on precipitation in an area, which changes agriculture practices. This eventually affects food security.
    • Uncontrolled development:
      • Unabated development in sensitive areas like Ladakh, without keeping in mind the sustainable practices that have supported life under extreme conditions, will eventually lead to disruption of the area’s ecology.
      • It may also lead to land subsidence like we recently witnessed in Joshimath since Ladakh is even more fragile than Chamoli district.

Ladakh’s demand of Sixth Schedule

• After its special status was removed, several political groups in Ladakh have been demanding that land, employment, and the cultural identity of Ladakh, should be protected under the Sixth Schedule.

Issues faced by Ladakh:

• No decentralization of power:
  • There had been four MLAs from the region in the erstwhile J&K Assembly; the administration of the region is now completely in the hands of bureaucrats.
  • To many in Ladakh, the government now looks even more distant than Srinagar.
• Changed domicile policy in Jammu and Kashmir: 
  • Also, the changed domicile policy in Jammu and Kashmir has raised fears in the region about its own land, employment, demography, and cultural identity.
• Limited Finances:
  • The UT has two Hill councils in Leh and Kargil, but neither is under the Sixth Schedule.
  • Their powers are limited to collection of some local taxes such as parking fees and allotment and use of land vested by the Centre.

Recommendations:

• Recommendation of the National Commission for Scheduled Tribes:
  • In September 2019, the National Commission for Scheduled Tribes recommended the inclusion of Ladakh under the Sixth Schedule. 
    • The Commission took note of the fact that the newly created Union Territory of Ladakh is predominantly a tribal region in the country.
  • Report highlights of the Parliamentary Standing Committee:
    • The Parliamentary Standing Committee on Home Affairs recently tabled a report in the Rajya Sabha.
    • The report stated that, according to the 2011 Census, the tribal population in the Union Territory of Ladakh is 2,18,355, that is 79.61% of the total population of 2,74,289.
    • Special Status:
      • The committee recommended that special status may be granted to the Union Territory of Ladakh considering the developmental requirements of the tribal population.
    • Examining the possibility of fifth or sixth Schedule: 
      • The Committee further recommends that the possibility of including Ladakh in fifth or sixth Schedule may be examined.

General Studies Paper 2

Context:

• India’s External Affairs Minister recently held wide-ranging talks with visiting Canadian Foreign minister.
• Both nations reviewed the progress in bilateral relations,which are anchored in the following:
  • Shared democratic values,
  • Growing economic linkages,
  • Security cooperation,
  • Mobility of students and professionals and
  • Strong people-to-people ties.
• Deepening collaboration & EPTA:
  • Both sides expressed interest in deepening collaboration across domains and looked forward to the Early Progress Trade Agreement (EPTA).
• India’s significance for Canada:
  • India’s economic and population growth are driving demand for education, health services, food, critical minerals and green infrastructure.
  • These are all sectors of Canadian strength and Canada is looking forward to grasping these opportunities.

India-Canada Bilateral Relations

• About:
  • India established diplomatic relations with Canada in 1947.
  • Prime Minister of India’s visit to Canada in April 2015 elevated the bilateral relation to a strategic partnership. 
  • In recent years, both countries have been working to enhance bilateral cooperation in a number of areas of mutual importance.
  • Bilateral Mechanisms:
    • Both sides pursue bilateral relations through the dialogue mechanisms such as Ministerial level- Strategic, Trade and Energy dialogues; Foreign Office Consultations; and  other sector specific joint working groups (JWG).
  • Commercial relations:
    • An annualised Trade Ministers dialogue has been institutionalised to review trade and economic relations.
    • Both sides are engaged in technical negotiations for a Comprehensive Economic Partnership Agreement (CEPA) including trade in goods, services, investment, trade facilitation etc.
    • Major Items of Indian Exports are: 
      • Medicines, Garments, diamonds, chemicals, gems and jewellery, petroleum oils, made-up, sea food, engineering goods, marble and granite, knitted garments, rice, electric equipment, plastic products, etc.
    • Major items of Canada’s export to India are: 
      • Pulses, fertilizers, newsprint, aircrafts & aviation equipment, diamonds, copper ores and concentrates, bituminous coal, wood pulp, nickel, unwrought aluminum, asbestos, god, cameras, lumber, ferrous waste, etc.
    • Nuclear Cooperation:
      • Indo-Canadian relations deteriorated in the wake of India’s Smiling Buddha nuclear test of May 1974 when the Canadian government severed bilateral nuclear cooperation with both India and Pakistan.
      • However, in June 2010, a Nuclear Cooperation Agreement (NCA) with Canada was signed and came into force in September 2013.
        • The Appropriate Arrangement (AA) for the NCA was signed in March 2013, under which a Joint Committee on Civil Nuclear Cooperation was constituted.
      • Science and Technology: 
        • Indo-Canadian Science and Technology cooperation has been primarily focussed on promoting Industrial R&D which has potential for application through development of new IP, processes, prototypes or products. 
          • Canada was a partner country for the Technology Summit 2017.
        • Department of Biotechnology under IC-IMPACTS program implements joint research projects in health care, agri-biotech and waste management.
        • The Department of Earth Science and Polar Canada has started a programme for the exchange of knowledge and scientific research on Cold Climate (Arctic) Studies.
      • Space: 
        • India and Canada have been pursuing successful cooperative and commercial relations in the field of Space since the 1990s mainly on space science, earth observation, satellite launch services and ground support for space missions.
        • ISRO and Canadian Space Agency (CSA) signed two MOUs in the field of exploration and utilisation of outer space in October 1996 and March 2003.
        • ANTRIX,the Commercial arm of ISRO, has launched several nanosatellites from Canada. 
        • ISRO in its 100th Satellite PSLV launched on 12 January 2018, also flew the Canadian first LEO satellite, from the Indian spaceport  Sriharikota, Andhra Pradesh.
      • Security and Defence:
        • India and Canada collaborate closely in international fora, particularly through the UN, Commonwealth and G-20.
        • Defence ties have been expanding with mutual ship visits.
        • There is robust cooperation on counter terrorism issues, particularly through the framework of the JWG on Counter-Terrorism.
      • Agriculture:
        • The bilateral MoU on agriculture cooperation was signed at the federal level in 2009.
        • The first meeting of the JWG set under this MoU was held in New Delhi in 2010, which led to the creation of three sub-groups on knowledge exchange in emerging technologies; animal development and agricultural marketing. A Joint Working Group for Pulses has been set up separately.
      • Education:
        • Education is a key area of mutual interest. Recently India became the top source of foreign students studying in Canada.
        • The MoU on Higher Education (2010) with Canada was renewed in February 2018.
      • People-to-People ties:
        • Canada hosts one of the largest Indian diasporas in the world, numbering 1.6 million  (PIOs and NRIs) which account for more than 4% of its total population. The diaspora has done commendably well in every sector in Canada. In the field of politics, in particular, the present House of Commons (total strength of 338) has 22 Members of Parliament of Indian origin.
      • Cultural Exchanges: 
        • Canada was the Country of Focus at the48th International Film Festival of India held in Goa in November 2017.
        • There is also an India – Canada Coproduction Agreement in films.
          • Diwali has been celebrated on Parliament Hill for the last 18 years.
        • Cooperation in COVID-19 Pandemic:
          • Repatriation flights: Special charter flights were operated by the Canadian High Commission and facilitated by India to evacuate stranded Canadian nationals from India.
          • Supply of medicines:Export of a total of 12.34 crore paracetamol tablets, 5 crore Hydroxychloroquine tablets and 3510 kgs of Hydroxychloroquine Sulphate USP (API); and  10 Million eye shields with face masks were approved and shipped to Canada.

Challenges

• Sikh extemism:
  • Sikhs constitute a significant proportion of the Indian diaspora, they make up less than one percent (a little over 500,000) of Canada’s total population.
  • The issue of Sikh separatist groups operating in Canada has become a growing source of tension between India and Canada.
  • While Sikh militancy has largely died down in India, concerns remain about the revival of the Khalistan movement.
  • Despite this, the Sikh diaspora commands a reasonable influence in Canada’s federal politics, specifically in the provinces of British Columbia and Ontario.
• India’s structural impediments: 
  • India still has to overcome structural impediments such as complex labour laws, market protectionism, and bureaucratic regulations.
• Inadequate trade:
  • While India–Canada economic relations have made some progress, Canada remains an insignificant trading partner for India.

Way ahead

• India-Canada relations have struggled to prosper, despite the two countries sharing various complementarities such as their democratic character and association in the Commonwealth.
• Even so, India’s economic potential, including the investment opportunities it offers, has led Canada to periodically review the economic dimension of this bilateral relationship in its India policy.
• India must foster a deeper understanding of Canada and the potential it holds for India.

General Studies Paper 3

Context:

• Just Energy Transition Partnership (JET-P)is emerging as the key mechanism for multilateral financing by developed countries to support an energy transition in developing countries.
• This has taken on particular significance following the insertion of the phrase ‘phase-down’ of coal in the Glasgow Pact. After South Africa, Indonesia, and Vietnam, India is considered the next candidate for a JET-Partnership and India’s G-20 presidency could potentially be an opportune moment to forge a deal.
• However, India must develop a coherent domestic Just Energy Transition (JET) strategy in order to negotiate a financing deal that addresses its unique set of socio-economic challenges.
• India’s initial JET-P negotiations last year reportedly stalled over coal ‘phase-down’ and how to operationalize India’s just transition. The emphasis by developed countries on coal phase-down, without adequate attention to country context, disregards the crucial difference in energy transition between industrialised and emerging economies.

Just Energy Transition:

• Just Energy Transition refers to the shift from reliance on non-renewable, fossil fuel-based energy sources to renewable,clean energy sources in order to mitigate the impacts of climate change and promote sustainability.
• The transition to a just energy system seeks to ensure that access to energy is equitable and benefits all members of society,rather than primarily benefiting corporations and the wealthy.
• This includes promoting renewable energy sources such as wind and solar, as well as energy efficiency measures and the development of energy storage solutions.
• Among the three JET-P deals signed so far, only South Africa’s deal mentions a ‘just’ component– funding reskilling and alternative employment opportunities in the coal mining regions.
  • The other two JET-Ps (Indonesia and Vietnam) are focused on mitigation finance for sector-specific transitions.

Issues with the Just Energy Transition:

• Affect Near-term Fossil-Dependent Jobs:
  • The transition to a more sustainable energy mix can impact workers who are currently employed in the fossil fuel industry.
  • The shift away from fossil fuels may result in job losses, which can be disruptive for affected communities and workers.
• Disrupt Forms of Future Energy Access:
  • The transition to a cleaner energy mix may disrupt traditional forms of energy access, particularly in developing countries where access to reliable electricity remains limited.
  • The cost and infrastructure requirements of new energy sources,such as wind and solar power, may be challenging to implement in areas with limited resources.
• Shrink the State’s Capacity to Spend on Welfare Programmes:
  • As the government invests in new energy infrastructure and technology, there may be less funding available for programs such as healthcare, education, and housing assistance.
  • This can result in reduced support for vulnerable populations and potentially worsen existing socio-economic disparities.
• Cost:
  • Despite the long-term benefits, the initial cost of transitioning to renewable energy can be higher, making it a challenge for some communities, particularly those with limited financial resources.
• Energy Storage:
  • Renewable energy sources, such as wind and solar, are not always available and must be stored for use during times when the sun isn’t shining, or the wind isn’t blowing.
• Energy Infrastructure:
  • Significant investments in energy infrastructure are needed to support the transition to renewable energy sources.

What are the Related Steps taken by India?

• India has signalled a commitment to clean energy with ambitious targets like 500GW of non-fossil, including 450 GW Renewable Energy (RE) capacity addition and 43% RE purchase obligation by 2030.
  • These targets are supported through complementary policy and legislative mandates(Energy Conservation (Amendment) Act), missions (National Green Hydrogen Mission), fiscal incentives (production-linked incentives) and market mechanisms (upcoming national carbon market).
• Net Zero Target:
  • India has set itself an ambitious long-term goal of reaching net zero emissions by 2070.
  • In August 2022, India updated its Nationally Determined Contributions (INDC)under the Paris Agreement to reflect its aim of achieving 50% cumulative electric power installed capacity from non-fossil fuel based energy sources by 2030
• Energy Conservation Amendment Bill, 2022:
  • In August 2022, the Lok Sabha passed the Energy Conservation Amendment Bill, 2022which aims to mandate the use of non-fossil fuel sources including green hydrogen, green ammonia, biomass and ethanol for energy and feedstock in industries.
  • The Bill also gives the power to the Central Government to establish carbon markets.

What should be India’s Strategy for a Fair Energy Transition?

• Acceleration in RE Deployment Rates:
  • To accelerate RE deployment that can have significant developmental co-benefits, a low-hanging option is shifting energy demand patterns in ways that enable faster RE capacity addition:solarisation of agricultural electricity demand; electrification of diesel-powered Micro, Small and Medium Enterprises (MSMEs) and decentralised RE for residential cooking and heating.
  • Stimulation of energy demand through rural productivity enhancement will further aid RE acceleration as well as help to address the rural-urban economic divide, create rural jobs, and thereby address inter-generational and spatial inequities.
• Domestic Manufacturing of Clean Energy Components:
  • Domestic manufacturing of clean energy components is critical to sustain a JET, build energy self-sufficiency, and tap the green jobs promise of 21st century energy.
    • The challenge is in achieving cost competitiveness (Indian components are 20% costlier than Chinese components) and giving preference to domestic components without addressing cost competitiveness may slow down the pace of deployment.
  • The way around this is to negotiate access to markets outside India as part of a JET-Partnership,to reduce the cost gap through economies of scale.
• Re-aligning the Current Use of Coal Resources:
  • The current use of coal resources needs to be re-aligned to enhance efficiency until the phase-down period.
  • An alternative solution could be to optimize coal-fired power plants near coal mines,rather than positioning them according to energy demand in different states.
    • This would enable coal to be used more efficiently because transportation of coal is more energy-intensive than transmission of electrons (electricity), and also lead to fewer emissions.
    • It would also lead to cheaper power, as transportation accounts for one-third of the cost of coal for power plants;the resultant savings could also help finance much needed emission control retrofits.
    • It would indirectly reduce emissions due to more efficient use of coal.

General Studies Paper 2

Context:

• Budgetary allocation for the Union Ministry of Minority Affairs decreased by 38% in 2023-24 compared to 2022-23. The major decline was in the allocation for pre-matric scholarships, free coaching for minorities, skill development and livelihoods programmes (including USTTAD scheme, Nai Manzil and Scheme for Leadership Development of Minority Women) .
• Also, allocation for the Umbrella Programme for Development of Minorities,which includes the Pradhan Mantri Jan Vikas Karyakram and Education Scheme for Madrasas and Minorities,  fell from ₹1810 crore to ₹610 crore, which is a dip of 2% in allocation.

Major Schemes in India for the Welfare of Minorities:

• Pre-Matric Scholarship Scheme, Post-Matric Scholarship Scheme, Merit-cum-Means based Scholarship Scheme:For educational empowerment of students, through  Direct Benefit Transfer (DBT)
• Naya Savera- Free Coaching and Allied Scheme:The Scheme aims to provide free coaching to students/candidates belonging to economically weaker sections of minority communities for preparation of entrance examinations of technical/ professional courses and competitive examinations.
• Padho Pardesh: Scheme of interest subsidy to students of economically weaker sections of minority communities on educational loans for overseas higher studies.
• Nai Roshni:Leadership development of women belonging to minority communities.
• Seekho Aur Kamao:It is a skill development scheme for youth of 14 – 35 years age group and aiming at improving the employability of existing workers, school dropouts etc.
• Pradhan Mantri Jan Vikas Karyakram (PMJVK):It is a Scheme designed to address the development deficits of the identified Minority Concentration Areas.
  • The areas of implementation, under PMJVK, have been identified on the basis of minority population and socio-economic and basic amenities data of Census 2011and will be known as Minority Concentration Areas.
• USTTAD (Upgrading the Skills and Training in Traditional Arts/Crafts for Development):Launched in May 2015 aims to preserve the rich heritage of traditional skills of indigenous artisans/craftsmen.
  • Under this scheme HunnarHaats are also held all over the country to provide a nation-wide marketing platform to Minority artisans & entrepreneurs and to create employment opportunities.
• Prime Minister-Virasat Ka Samvardhan (PM Vikaas):New PM Vikas has been added to the Ministry of Minority Affairs’ Budget in 2023.
  • It is askilling initiative focussing on the skilling, entrepreneurship and leadership training requirements of the minority and artisan communities across the country.
  • The scheme is intended to be implemented inconjunction with the ‘Skill India Mission’ of the Ministry of Skill Development & Entrepreneurship and through integration with the Skill India Portal (SIP).